Andersen to Appeal Unusual Trial And Jury Verdict

Jun 17th 2002

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Arthur Andersen announced it will appeal the decision in its obstruction-of-justice case. Andersen's attorneys said the jury's thinking was unusually narrow, and the decision could affect scores of other firms and clients. In reaching their decision, the jurors excused the wider issue involving shredding of documents and ignored the guilty plea of former Enron audit partner David Duncan. Instead, the jury found the firm guilty because Mr. Duncan revised a draft of an internal document on the advice of in-house attorney Nancy Temple.

"The chances of this conviction standing up are one in a million," lead defense attorney Rusty Hardin said. Andersen is to be sentenced Oct. 11, 2002. Under normal legal procedures, the firm cannot file an appeal until after that date, and the appeal could take a year or more to make its way through the courts. In the meantime, Andersen may file a motion to have the verdict set aside on the grounds that justice wasn't served.

Lessons for Other Firms

Mr. Hardin said the jury's verdict demonstrates that jurors rejected the government's primary (and highly publicized) accusations against the firm. "They convicted on a theory that wasn't even argued by the government," he said, adding that the narrow basis of the decision could affect many other firms across America. (Jury Finds Andersen Guilty, New York Times, June 16, 2002.)

According to press accounts, the jury was convinced by the editing of an internal memo. The memo documented a conference call in which Mr. Duncan challenged Enron's reporting of a loss as "nonrecurring." In a preliminary draft, Mr. Duncan described the reporting as "misleading." Ms. Temple suggested "aggressive" instead. She also asked that he remove her name from the final copy. Observers have said this is routine legal advice and not at all illegal. But her remark, combined with the edits, convinced the jury there was evidence of a single count of obstruction of justice. The jury foreman told the Times it didn't matter that copies of the original memo were kept by the firm. "It was the intent," he said. (Jurors Say File Shredding Didn't Factor Into Verdict, New York Times, 6-16-02.)

"If in fact what they chose means we're guilty of a crime," said Mr. Hardin, "then every corporation in America ought to just cringe with fear."